The FCA welcomes the Government’s publication of their consultation response and the draft legislation on bringing environmental, social and governance (ESG) ratings providers into regulation. This is widely supported by industry.
As financial services firms integrate ESG into their activities and expand their products in this space, they are increasingly reliant on third party ESG data and ratings services. We have previously said we support bringing ESG ratings providers into regulation, to improve transparency and trust in the market.
Making new rules
We will continue to work closely with the Government on their next steps as they welcome technical comments on their draft legislation.
Once the legislation is finalised by the Government next year, we intend to consult on proposals for the future regulatory regime in 2025.
We support a globally consistent approach that enables users to make better informed investment decisions and gives the market confidence in the reliability and quality of these products. Our regime will be proportionate and in line with the International Organisation of Securities Commission (IOSCO) recommendations[2], which focus on transparency, good governance, managing conflicts of interest, and proper systems and controls.
Next steps
As we develop the future regulatory regime, we will engage widely to inform our approach. This will include all types of ESG ratings providers and users. We support a level playing field between all firms providing ESG ratings. We will continue engaging with other international authorities, including the EU, to support regulatory alignment.
In 2023 we supported the launch[3] of an industry-led Code of Conduct for ESG ratings and data product providers, which is grounded in the IOSCO recommendations. We continue to encourage both ESG data and ratings providers to sign up to the Code. This has been leveraged by Hong Kong to develop their Code, and other countries such as Singapore and Japan have introduced their own Codes of Conduct.